If you have IT staff in the, US, UK, etc., the cost of, recruiting, paying, providing office space and retaining IT developers is very high. I saw an article recently about the $200k developer!
According to various websites the average Java developer in London is paid £60,000 not including bonus, national insurance, pension, equity, recruitment agency fees (15 - 20% of annual salary), etc., making the true cost of employment significantly higher!
Office space in major western cities is amongst the most expensive in the world.
If your competitors staff are located onshore you can get a competitive advantage by locating some or all of your IT staff offshore, e.g. developers, testers, support, devops, etc.
How is this a competitive advantage?
If you can halve some of your IT staff costs by using offshore resource the money goes straight to the bottom line or can be spent elsewhere, e.g. sales, marketing, etc., or better still recruit twice as many IT staff so you can process your backlog quicker and deliver faster than your competitors.
A short while ago I was talking to the CEO of a SaaS CMS (Content Management System). He was complaining that they have an 18 month product backlog which was restricting sales and that they meet every week to prioritise the backlog. All their staff were based in London. By offshoring they can recruit many more developers whilst maintaining the same costs and yet win more business.
Just recently at TechHuddle we recruited a dedicated team of experienced PHP developers for a customer in 6 weeks. That was 6 weeks from the customer signing the contract with us to the team starting work. The customer had full control over every person recruited.